The Blog of International Judicial Assistance | By Ted Folkman of Pierce Bainbridge

Posted on October 1, 2018

The case of the day is Rockefeller Technology Investments (Aisa) VII v. Changzhou SinoType Technology Co. (Cal. Ct. App. 2018). After a dispute between the parties arose, Rockefeller demanded arbitration. SinoType didn’t participate in the proceedings, and the tribunal issued an award for $414 million in Rockefeller’s favor. The agreement to arbitrate included the parties’ consent to service of process by FedEx or similar courier. Rockefeller sought to confirm the award in the Los Angeles County Superior Court, which granted the motion (SinoType again did not participate). Service of process in the confirmation proceedings was by FedEx—SinoType was in China. SinoType later moved to set aside the judgment as void on the grounds that it had not been served with process. The Superior Court denied the motion, and SinoType appealed. On appeal, the court reversed.

If service by FedEx is valid under the Hague Service Convention, it must be because it is service by postal channels, which is permissible under Article 10(a) unless the state of destination objects. But China has objected to service by postal channels. So the real question in the case is: can parties agree to accept service by a method that the Convention neither authorizes nor permits.

The court said no. It pointed out that the Convention (in the words of Volkswagen) is “mandatory,” and that by its own terms it applies in all civil or commercial cases where there is occasion to transmit a judicial document for service abroad. The word “mandatory” here can be a bit confusing. The Hague Conference conclusions and recommendations use the word “exclusive” to mean that a plaintiff must use a method authorized or permitted by the Convention whenever the Convention applies, and they use the word “mandatory” to mean that the Convention itself, rather than the law of the forum, determines when there is occasion to transmit a document for service abroad. In this sense, the Convention, everyone agrees, is exclusive but non-mandatory. So it would have been better for the Court in Volkswagen to use the word “exclusive,” but whatever. In the context of today’s case, though, it’s probably worth spelling out just what “mandatory” means in the US cases: it means “exclusive.”

The implication of this is that if a defendant agrees to waive service altogether, then under the law of the forum, there is no occasion to transmit a document abroad for service at all. But if, as happened here, a defendant agrees to accept service via a particular method, and that method requires transmitting the document to China, then there still is such an occasion, and the Convention does apply.

What might the parties have done to avoid the Convention? They could have agreed to an irrevocable appointment of an agent for receipt of service of process in the United States and agreed that service would be complete upon receipt by the agent. Or they could have agreed to waive any affirmative defense of insufficient service of process. But that’s not what they agreed.

The Convention itself cannot bar parties from outright waivers of service of process, because if it could, it would be mandatory (in the Hague Conference’s sense of the word, not the US Supreme Court’s sense of the word), and everyone agrees that it is not mandatory.

Still, you might say, why can’t the parties agree to a particular method of service that is not permitted by the Convention? Isn’t the power to make such an agreement implied in the power to waive service altogether? But the Convention doesn’t exist just to make life easier for private parties. It’s a bridge between legal systems. One of its purposes is to allow American litigants a way of effecting service of process in other countries without offending those countries’ notions of judicial sovereignty. In other words, it’s the Chinese state’s interests that are at stake here, not just the interests of the litigants. And this was the point on which the court really rested its holding: “Permitting private parties to avoid a nation’s service requirements by contract is inconsistent with [Chinese law], as well as with the Convention’s stated intention to avoid infringing on the ‘sovereignty or security’ of member states.”

Now, this isn’t to say that SinoType is clearly in the right. Suppose instead of defaulting, SinoType had litigated the confirmation case, but had omitted to raise the process defect in its answer. It would (I assume, since I am not a California lawyer) have waived the argument, because in general, you have to raise such matters in your first pleading. This shows that waiver of such arguments is possible, notwithstanding the foreign state’s interests. It’s unclear whether there would be grounds for arguing a waiver in the litigation here, though, as SinoType defaulted without appearing in the case.

The one appellate case that the California court noted as possibly inconsistent with its views is, in fact, consistent, if you take into account the difference between waiver and agreement to accept service inconsistent with the Convention. In Alfred E. Mann Living Trust v. ETIRC Aviation S.A.R.L., 910 N.Y.S.2d 418 (App. Div. 2010), the parties’ contract expressly waived service of process. So even though the decision spoke about waiver of the “Convention,” the case was really about waiver of the requirement of service.

In short, I’m not 100% sure, but the decision seems sound to me. The California Supreme Court has just granted a cert. petition, so we will know more in a few months.